In early 80s when American Airlines introduced its customer loyalty and reward program, food was awful, seats were uncomfortable and margins were sky high. The frequent flyer privilege translated into a meager ticketing discount and a booking priority, no member-only queues, no alliance (air travel) network deal, no dedicated support and no executive lounge. Today, however, it’s a different story. Popularized by the George Clooney flick ‘Up in the Air’, the frequent flying club is about novelty and status, it’s about being greeted at every terminal, smiled at every stop, hurried through the security system, and being the first one on board. It’s about luxurious traveling being made popular again; only this time it’s the east that leads the charge.

Current Developments:

With the Asian and Middle Eastern airlines dominating travel charts worldwide, there is clear shift in the air-brand hierarchy. Qatar Airways, one of ‘big three’ Arab carriers, was crowned the top airline for the second year running in the annual 2012, Skytrax rankings, “We are talking about a fleet with an average age of four years. These newly designed aircrafts are packed with comfort and technology”, shares a travel agent in Doha. While relatively young, Qatar, Etihad and Emirates have consolidated a stronghold over connecting (international) flights, “Qatar and UAE are regional hubs connecting Asia with the rest of the world”, shares Jalal-u-din Jami, a research analyst at LiveAdmins, UAE, adding, “While the airlines (big three) benefit from the strategic location of their offices, their ability to innovate and provide premium customer service is what makes them a global success”.

Loyalty Programs:

While loyalty programs are predominately associated with western brands, a lot of global brands are now employing customer retention strategies that involve issuing club memberships, return visitor discounts, purchasing points and redeemable rewards, etc. “We have seen this trend take precedent in the global retail segment. Most supermarkets and pharmacies (international chains) in the US have some sort of loyalty program, Smith’s, Office Depot, Best Buy, Sears, Staples, etc. all offer club cards that offer discounts on future purchases or bundles”, explains Harry Llyod, an e-marketing consultant from Chicago.

However, the strategy works in two fold, where frequent purchasing or travel is incentivized the organization is not only able to improve the chances of repeat business, but also learn about their customers. Most, club memberships require customer to send in some basic information which is then used to build a customer profile, Every time a member swaps a loyalty card at the POS (Point of Sale) terminal, you can narrow down their buying patterns and preferences. Given the identifier (customer profile), businesses can personalize products and service delivery. This not only enhances the customer’s experience but improve brand (business) loyalty. Apart from this, loyalty schemes also help attract ‘habitual buyers’, “In terms of profitability, the ideal customers are those that either shops out of habit or out of (brand) loyalty; and discount (privilege) club cards help attract both”, shares Llyod.

Other similar techniques include punch cards, more frequently utilized by book store and cafes. Here, the buyer is allotted a card on purchase of an item/service, the card is then punched subsequently for every future purchase, and once the customer attains a predefined number of ‘punches’, they are usually entitled to a free item/service or a discount.

The Frequent Flying Club:

Similar, to other loyalty programs, most airlines today offer their frequent flyers redeemable awards, discounts and other premium services. However, notoriously popular for their extravagance, the Arab ‘big three’ have been the cause of envy for many competing airlines. Between tier lounges, celebrity chefs, extravagant buffets, inflight entertainment, and chauffer services, the Arab airlines (big three) have a knack for attracting first/business class travelers.

While relatively new in the privilege flying club market, the big three are benefiting immensely from a well-developed infrastructure. Qatar Airway’s privilege club currently holds four tiers, each of which carries its own set of benefits. Gold members are entitled to a first class treatment both at the airport and while boarding, irrespective of their travelling class. While Etihad and Emirates too offer similar privileges, their core package focuses on adding more miles to your account, including bonuses for utilizing partner services. Etihad Airways also offer double miles to clients celebrating their birthdays!

International Alliances:

“The Arab airlines (big three) have identified the correct niche, ‘comfort traveling’, economy and business class alike”, explains Jami, adding, “Perpetuated by a strong desire to deliver qualitative customer service, Emirates and Etihad have become serious contenders within the region and abroad”. While the ‘big three’ have traditionally remained withdrawn from international air-alliances, 2012 saw the Qatari airlines, Qatar Airways joining the likes of American Airlines, Qantas, Malaysia Airlines, Cathy Pacific, Japan Airlines and Finnair in the largely successful, oneworld alliance.

Largely driven by Qatar Airways’ expansion ambition, the oneworld alliance is a welcome surprise for its privilege club members, “While Qatar Airways partners with multiple other commercial airlines; its induction in the oneworld alliance truly enhances the company’s value proposition. Privilege club members will now be able to earn and redeem rewards from partnering airlines, have access to some of the most luxurious lounges in the world, along with multiple other ancillary services provided by the oneworld alliance!” exclaims the Doha based travel agent. Etihad and Emirates both have multiple commercial partnerships with other competing airlines, including a reciprocal reward sharing program.

The Customer Privilege:

With millions of privilege club members, the ‘big three’ are constantly working to enhance customer experience by adding dedicated premium lounges at various international airports. Emirates, recently inaugurated its 35th dedicated lounge for its first/business class passengers and members of its frequent flyer program, at the Milan Malpensa Airport. This purpose built lounge features the airlines contemporary new design along with amenities that include high-end seating for business and leisure, LED screens, dedicated dining area, shower facilities, a water feature along with various artworks. “This new Emirates Lounge reaffirms our dedication to providing our premium customers with consistently high standards”, shared Mohammed H. Mattar, Emirates’ Divisional Senior Vice President – Airport Services.

The idea of a privilege club is to reward loyalty by providing premium services to returning customers. Customers that spend thousands of dollars traveling year round are able to receive some sort of compensation for their troubles, “The check-in and transfer procedures were really smooth, I was in line for no more than three minutes, and the Premium lounge at Doha is just outstanding, comfortable and a wonderful array of food choices. Entertainment both at the airport and inflight was good as well. In a nutshell, a totally memorable trip!” reviewed one Qatar Airways traveler.

With the recession period coming to a close, the travel industry is expecting steady growth over the course of this decade (2010-20). As the Middle Eastern market prepares for a host of new travelers and tourists, native airlines are sure to benefit. “The growth in the tourism industry is profitable sign for Emirates and Etihad”, explains Jami, adding, “This is sure to up the ante for competing airlines. Be it ground or inflight service, the Arab ‘big three’ are setup for quality”. This trend is likely to have rollover effects on the privilege and frequent flying memberships. While still a novelty, the local market is slowly acclimatizing itself to the program. However, with the Arab ‘big three’ slowly creeping up the world rankings, privilege flying is surely to attract more memberships from individuals seeking comfort and service quality.